S&P 500 down, Nasdaq slides as AI chip worries persist

By Shashwat Chauhan and Avinash P

July 7 (Reuters) – The S&P 500 slipped and the Nasdaq dropped sharply on Tuesday, weighed by losses in chip stocks amid doubts over the durability of the AI-led rally despite robust Samsung earnings, while a report on China’s DeepSeek making an AI chip also hit sentiment.

Nvidia fell 1.8% after Reuters reported Chinese startup DeepSeek is developing its own AI chip, a move that could reduce its dependence on Nvidia and Huawei chips.

Chip stocks tumbled across Wall Street and the Philadelphia SE Semiconductor index declined 5.5%, hitting a four-week low. Intel’s shares sank 8.2%, while Micron fell 7.3%, making the companies among the top losers on the benchmark S&P 500.

Samsung Electronics’ shares sank in South Korea despite the company reporting a 19-fold jump in second-quarter operating profit and surpassing its combined earnings over the past three years.

“The (Samsung) results were in themselves fundamentally good but it seems then to have a knock-on effect at general markets that once people start being negative about Samsung, that negativity extends across markets,” said Michael Field, chief equity market strategist at Morningstar.

Shares of chip companies have been some of the biggest winners of the AI trade so far this year amid hopes of insatiable AI demand, though concerns of the sector being overbought as well as profit-taking by investors have led to some volatility.

Another test of the appetite for chip stocks looms later this week, when South Korean giant SK Hynix’s U.S. listing starts trading on the Nasdaq.

Elon Musk’s SpaceX began trading as part of the Nasdaq-100 index and a wave of brokerages initiated coverage on the stock as an industry-mandated quiet period ended. Its shares declined 4.5%.

Nine out of the 11 S&P 500 sectors were trading higher as chip weakness overshadowed advances elsewhere on Wall Street. Consumer staples and healthcare were the top gainers.

At 09:58 a.m. ET, the Dow Jones Industrial Average rose 14.18 points, or 0.03%, to 53,070.09, the S&P 500 fell 25.30 points, or 0.34%, to 7,512.13, and the Nasdaq Composite lost 267.74 points, or 1.02%, to 25,853.42.

The Dow, meanwhile, cruised to another intraday record as gains in consumer and healthcare names buoyed the blue-chip index. It crossed the 53,000-point mark on Monday for the first time ever. The index clocked its fifth 1,000-point milestone this year as receding oil prices on the back of easing Middle East tensions offered some support.

Oil prices, however, rose on Tuesday following reports of attacks on vessels near the Strait of Hormuz.

Fiserv climbed 3.5% after media reports that the payments firm had held discussions with U.S. banks including JPMorgan and Bank of America to sell its payments infrastructure business handling debit card transactions.

Rivian dropped 13.3% after the electric-vehicle maker launched an offer to sell 75 million shares even as it forecast second-quarter revenue above analysts’ estimates.

Meanwhile, U.S. Federal Reserve watchers will get another glimpse into how new Chair Kevin Warsh steers the central bank when the minutes of its latest meeting are released on Wednesday, the first of his tenure.

Declining issues outnumbered advancers by a 1.1-to-1 ratio on the NYSE and by a 1.79-to-1 ratio on the Nasdaq.

The S&P 500 posted no new 52-week highs and no new lows, while the Nasdaq Composite recorded no new highs and no new lows.

(Reporting by Shashwat Chauhan and Avinash P in Bengaluru; Editing by Pooja Desai)